Tabakovic: We are buying euros because we are not allowing the dinar to strengthen too much

The National Bank of Serbia has decided to continue the measure of limiting the interest rates on credits, credit cards and overdrafts through the Law on Protection of Users of Financial Services, which should be adopted by the end of the year. The reason is the still volatile economic situation in the world, which we can do nothing about, but what we can to is to find a way, in that kind of a global uncertainty, to protect every person in Serbia from too-high banking charges. That is why we have proposed this law, which creates the framework for rational conduct of all users in the market. This measure is not unheard of in the world, and it is also supported by the EU directive on the ban on excessive charging of interest rates, but also the experiences of the NBS, which, with the implementation of the Strategy for Resolving Non-Performing Loans, has reduced their level from nearly 25% to 2.7%, Jorgovanka Tabakovic, the governor of the NBS, said in an interview for NIN.

As she said, no decision is ever perfect and no decision ever suits everybody, but “the responsibility of the NBS is to set the borders so as to ensure the sustainability of the financial system.”

– I would just like to add that we have tied the maximization of that interest to the market interest, so it can’t be called an administrative measure. We are talking about rational conduct of all participants in the market – she said.

When asked whether the dinar exchange rate is stable or deliberately low, that is, whether it is artificially maintained at a low level so that the authorities would more easily fulfill their promise of an average salary of EUR 930 or EUR 1,400 in 2027, Tabakovic says that it’s the opposite.

– In the past eight years, we have been operating in an environment of pressures toward the strengthening of the dinar, as a result of our improved economy, the growth of the FX inflow based on investments, exports, investments in dinar bonds and other factors. That has caused us to buy a net amount of EUR 11.5 billion in FX interventions since 2017. We thereby don’t allow the dinar to strengthen too much, and not that the NBS is keeping it too strong. Another exclusive piece of information is that the level of foreign direct investments is EUR 4.23 billion, and I expect it to be at last year’s level by the end of the year – she said and added that, in 2023, a record amount of EUR 3.94 billion had been bought so that the dinar would not strengthen too much, and that, up till that point, in 2024, another EUR 2.4 billion had been bought.

Narodna banka Srbije Beograd

National Bank of Serbia

NBS

Jorgovanka Tabaković

limitation of loan interest rates

dinar exchange rate

euro exchange rate

stregthening of the dinar